China’s Empty Incubators are a Sign of Development Run Amok

For years, the Chinese state has managed to strong arm the country’s economy through global crises by making huge investments into sectors like real estate and infrastructure. But, as Reuters reports, that top-down capital strategy is hitting a wall when it comes to China’s new dream: growing startups.

A recent national push for an innovation-driven economy has spurred local governments across China to build so-called innovation centers: spaces where entrepreneurs can start creating their very own company, rent-free. For the most part, the centers have failed to reach expectations: most have occupancy rates of less than 40 percent.

The problem, experts argue, is a lack of accompanying resources. Education levels across the country are too low to sustain the entrepreneurs needed to fill these new incubators. In addition, many innovation centers have been built in smaller, regional cities where the necessary innovators simply do not exist.

“The idea that you can predict location or the idea that every geography happens to have this nascent group just waiting to be given capital to go create the next Alibaba, is just not true,” Techonomy 16 participant Gary Rieschel told Reuters. Rieschel is the founder of Qiming Venture Partners, a China-based venture capital firm.

The empty innovation centers are a reminder that the state capitalism formula China has implemented with such success in manufacturing and real estate may not correlate with an information-based internet sector.